Filing for bankruptcy is sometimes compared to “finding a ray of light at the end of a dark tunnel.” It is also said that you are “wiping the slate clean” or getting a “fresh start.” If you’ve been asking yourself, “is bankruptcy really a fresh start?”, this blog is perfect for you. Keep reading this bankruptcy rundown, and about how much of a “fresh start” bankruptcy really is for you and your family. There are some caveats that you need to be aware of.
Types of Bankruptcy
First, let’s review the three different types of bankruptcy: Chapter 7, Chapter 11, and Chapter 13. Chapter 7 is the most common form of bankruptcy and can be considered a personal type of bankruptcy. In contrast, Chapter 11 is for corporations. Chapter 11 allows a corporation to reorganize its finances to help stay in business. Last, when filing for Chapter 13 bankruptcy, you can make payments on your debt until it is clear and can be discharged.
I am here to help you decide which type of bankruptcy you should file. If you choose to file for Chapter 13 bankruptcy, I will negotiate a payment plan that is acceptable to all parties. Once the payment plan is complete, your debts will be discharged. For Chapter 7, all credit card debts and “unsecured” debts are eliminated, and you are given a chance at a new life after 90 days. Chapter 13 also gives you a “fresh start,” after filing for bankruptcy, it just takes a bit longer.
Rebuilding Your Credit
Bankruptcy can be a credit crusher. With that being said, when looking for a fresh start after bankruptcy, you are probably wondering how long it takes to rebuild your credit. Filing for bankruptcy does not mean 7 to 10 years of bad credit. It will typically take a couple of years before you begin to regain a stronger credit score. Credit card companies may offer you new credit cards right after the bankruptcy is over, but they will have high-interest rates. In one of my past blogs, 5 tools to help rebuild your credit, I discuss some of the best ways to help you re-establish your credit score. If you have dreams of owning a home or purchasing a new home, you can typically qualify for a mortgage within two years.
Debts Discharged in Bankruptcy
The vast majority of debts get discharged in bankruptcy, but there are a few exclusions for public policy reasons. Child support, taxes, and student loans are not able to be discharged, which can hinder a fresh start.
A “Fresh Start”
A bankruptcy is an injunction that makes a debt uncollectible. The debt is erased, and all activity on the debt must stop from the day you file bankruptcy. Creditors can also attempt to collect from another source, such as a co-signer who has not filed bankruptcy.
It is vital to create a plan that will help you succeed after your bankruptcy has been finalized and your fresh start has begun. Check out tips to succeed in life after bankruptcy to learn more.
I am a Burlington bankruptcy lawyer with over 37 years of experience. Let me assist in guiding you through the bankruptcy process and help you achieve a fresh start after bankruptcy. Contact my office today to schedule a consultation. There is life after bankruptcy, and it starts here!
Read the top myths about bankruptcy.